sometimes i sit and think, and sometimes i just sit

sometimes i sit and think, and sometimes i just sit

If you get a chance, give Courtney Barnett a listen (shown on left).  When it comes to investing, are we sitting and thinking?  Or are we just sitting?

I am bothered by the performance of my portfolio.  Not just this year.  Let's be honest, outside of MFI, it has been somewhat short of stellar.  I can rationalize that I am a value investor and value is just out of vogue. But deep down I know I have never had the stomach to be a true value investor.

I seem to do best with buying (with some thought/process) and then walking away and not obsessing.  It is the obsessing and regular second-guessing/meddling that really hampers my portfolio performance.  I have actually done best with the smaller baskets - gold/miners or small banks.

If you have been reading my blog for a while and this sounds familiar... that is because I have had this internal debate before.

My Thoughts

In an ironic way, I don't think this blog helps.  It makes my attention span too short as I am writing about what goes on every week.  I think I might pare it back to just an update once a month.

Then I look at my MFI tracking and the dividend approach just seems to work so well.  Why am I screwing around using other approaches, when I have at my fingertips an approach that works great?

Right now I am about 45% in dividend portfolio and 35% MFI (20% Misc).  I think that is backwards. 

• Pare back my dividend stocks to a core group of 10.  35% of total investment.
• Change my Misc approach to baskets: shipping, bio-pharma, energy, small banks and other.  Each basket has 10 holdings so I can go with higher risk holdings, but not spaz out everytime I hit an air cushion.  Then I can only change baskets once a year.
• Expand MFI Formula (with extra funds from dividend paring) to simply be the universe of MFI stocks at 2.4%+ yield.  So remove random number generator.

I think there is a good chance I'll make these moves.  And then stop hyperventilating so much.

More sitting, and then thinking,  to follow.

MFI Monthly Tracking Portfolio 5/26/17

MFI Monthly Tracking Portfolio 5/26/17

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of May 2018.  As my faithful readers know, I have been tracking the Magic Formula Stocks as described by Joel Greenblatt in The Little Book That Beats the Stock Market since January 2006.  Every month I take the top 50 stocks over $100m market cap from his website and track how that portfolio of stocks fares versus the Russell 3000 for the next 12 months.  It has been an uphill struggle as the tracking portfolios have under-performed, driven in part by Chinese reverse merger fiascos, for-profit education stocks and home health care stocks all being proverbial albatrosses.

I also encourage new readers to read

Guide To New Readers

(you can also find this in Archives of October 2017)

People ask, does MFI not work anymore?  I am not sure. Perhaps 12 years isn't long enough. Perhaps it works better at a higher market cap cut off (I believe this to be true).  I think too many stocks make the screen over the years by "mistake"... that is they are not true value/cheap stocks. In 2011, we had a bunch of Chinese Reverse Merger stocks that hurt that year and were out and out frauds.  Then we have also had a number of stocks that have a one time spike in earnings that fools the formula.  Frankly, it might do better if instead of a trailing 12 month income look, it used a trailing 24 month look on income, to filter out the one time spikes.

But even with that being said, Value stocks have not exactly been in favor the past couple of years, although this appears to be changing (although painstakingly slowly).

Onward

 Fearless readers will recall we had a 29 month "losing streak"..  Then we had a 13 month winning streak. Now we have an 8 month losing streak, getting whooped 15.1% to 11.1% this month. This has been such a horrid stretch.  The past 8 closed portfolios have been absolutely stomped, 18.9% to 9.0% on average. So I suppose we should feel good "just" losing by 4 points  Ee-gads.

Guess what?  We are still struggling.  June and July 2017 are also trailing -  by a lot. It has been rugged.  Greenblatt warned there would be times people would want to quit and this would ensure in working down the road.

The good news is that 7 of the most recent 9 portfolios are leading, by an average of 3 percentage points apiece. Fingers crossed.

Here are the 50 stocks in descending performance order (from the portfolio that just hit a year):

Stock	Initial Price	End Price	Percent Change	Mkt Cap
RCM	3.47	8.04	131.7%	370
KORS	36.76	68.64	86.7%	6,121
MBUU	23.52	42.78	81.9%	422
SCMP	10.25	18.00	75.6%	445
USNA	64.35	112.60	75.0%	1,578
BPT	16.44	28.50	73.4%	432
SYNT	18.16	31.46	73.2%	1,519
MCFT	18.65	30.06	61.2%	348
BKE	15.94	25.25	58.4%	821
TIME	12.04	18.50	53.7%	1,202
FOXA	26.72	39.02	46.1%	50,029
TRNC	11.39	16.33	43.4%	374
CSCO	30.47	43.26	42.0%	157,500
TDC	28.60	38.77	35.6%	3,707
ESRX	59.76	77.08	29.0%	35,469
MNKD	1.52	1.93	27.0%	145
AMAG	18.80	23.70	26.1%	648
HPQ	17.98	21.91	21.8%	31,030
AMGN	150.62	178.24	18.3%	114,103
PDLI	2.39	2.81	17.6%	390
AMCX	53.04	59.35	11.9%	3,566
VEC	29.62	32.26	8.9%	323
GILD	62.71	67.38	7.4%	84,302
GHC	588.83	598.20	1.6%	3,321
NSR	33.05	33.50	1.4%	1,828
DLX	66.94	66.93	0.0%	3,303
UIS	12.05	11.95	-0.8%	607
IDCC	81.18	79.75	-1.8%	2,864
AVID	5.36	5.22	-2.6%	218
MIK	19.77	18.94	-4.2%	3,822
MSGN	21.45	19.95	-7.0%	1,610
QTHR	1.40	1.29	-7.9%	167
OMC	80.77	71.96	-10.9%	19,533
UTHR	119.08	103.60	-13.0%	5,422
DISCA	25.87	22.34	-13.6%	15,186
NLS	18.10	15.50	-14.4%	556
NHTC	24.99	21.26	-14.9%	317
VVUS	1.13	0.91	-19.5%	119
VIAB	34.24	27.50	-19.7%	14,094
TGNA	24.21	18.67	-22.9%	5,163
MPAA	29.41	21.30	-27.6%	582
MEET	4.66	3.34	-28.3%	321
NTIP	4.21	2.90	-31.1%	103
AGX	59.13	39.15	-33.8%	940
DHX	2.80	1.85	-33.9%	142
SQBG	3.22	2.08	-35.4%	203
PBI	13.91	8.76	-37.0%	2,782
GME	20.50	12.67	-38.2%	2,251
AOBC	22.84	12.53	-45.1%	1,287
ICON	6.18	0.66	-89.3%	352

Eight stinkers, down 30% or more.  Two of them would be in my MFI Formula bucket - GME and PBI... so it is more than just biotechs this time.

Here is every tracking portfolio in aggregate:

Date	MFI	R3K	Lead
1/6/2006	16.0%	10.9%	1
2/17/2006	21.2%	14.6%	1
3/29/2006	13.0%	9.6%	1
4/7/2006	10.3%	12.1%	0
5/12/2006	20.4%	18.6%	1
5/31/2006	29.2%	23.3%	1
6/30/2006	22.4%	20.0%	1
7/31/2006	19.7%	17.3%	1
8/31/2006	13.0%	13.3%	0
9/28/2006	12.7%	14.6%	0
10/27/2006	10.3%	12.0%	0
11/29/2006	-0.3%	4.8%	0
12/28/2006	-6.9%	3.4%	0
1/26/2007	-10.2%	-6.6%	0
2/27/2007	-3.7%	-1.0%	0
3/26/2007	-9.8%	-5.5%	0
4/27/2007	-10.9%	-5.0%	0
5/29/2007	-11.5%	-6.3%	0
7/3/2007	-30.0%	-15.6%	0
7/30/2007	-19.9%	-11.5%	0
8/30/2007	-12.5%	-8.7%	0
9/27/2007	-19.0%	-18.2%	0
11/2/2007	-40.4%	-34.3%	0
11/28/2007	-40.1%	-38.3%	0
12/28/2007	-36.3%	-40.0%	1
1/25/2008	-36.4%	-35.9%	0
2/26/2008	-51.7%	-41.5%	0
3/24/2008	-40.9%	-36.8%	0
4/25/2008	-25.6%	-31.0%	1
5/28/2008	-22.2%	-33.6%	1
7/2/2008	-11.7%	-25.3%	1
7/29/2008	-10.5%	-20.9%	1
8/29/2008	-13.8%	-17.9%	1
9/26/2008	-4.3%	-10.0%	1
10/31/2008	18.7%	13.9%	1
11/26/2008	50.9%	27.7%	1
12/26/2008	48.9%	32.3%	1
1/23/2009	59.3%	36.4%	1
2/27/2009	92.8%	55.6%	1
3/27/2009	85.8%	48.1%	1
4/24/2009	69.7%	45.8%	1
5/29/2009	31.8%	22.8%	1
6/29/2009	21.3%	24.0%	0
7/29/2009	19.5%	15.9%	1
8/28/2009	7.4%	8.8%	0
9/25/2009	12.6%	12.4%	1
10/30/2009	22.7%	18.3%	1
11/27/2009	24.3%	13.6%	1
12/31/2009	23.7%	18.1%	1
1/22/2010	19.0%	20.6%	0
2/26/2010	18.6%	23.6%	0
3/25/2010	10.0%	15.4%	0
4/23/2010	7.1%	11.4%	0
5/28/2010	19.3%	25.4%	0
6/29/2010	16.7%	25.7%	0
7/29/2010	5.4%	20.1%	0
9/2/2010	7.3%	10.1%	0
9/24/2010	-4.3%	0.3%	0
10/29/2010	-2.9%	10.4%	0
11/26/2010	-8.5%	1.4%	0
1/3/2011	-11.4%	0.1%	0
1/28/2011	-7.6%	4.9%	0
2/25/2011	-5.5%	5.0%	0
3/24/2011	-4.4%	7.4%	0
4/21/2011	-16.0%	3.2%	0
5/27/2011	-12.0%	-0.4%	0
6/24/2011	-9.5%	5.0%	0
7/29/2011	-4.3%	8.1%	0
8/26/2011	12.0%	21.6%	0
9/30/2011	23.5%	29.6%	0
10/28/2011	0.4%	11.5%	0
11/25/2011	13.9%	24.0%	0
12/29/2011	9.9%	15.9%	0
1/27/2012	7.4%	16.6%	0
2/24/2012	7.8%	13.3%	0
3/23/2012	9.1%	15.2%	0
4/27/2012	10.5%	15.3%	0
5/25/2012	23.4%	27.5%	0
6/22/2012	26.1%	24.6%	1
7/27/2012	30.4%	25.7%	1
8/24/2012	26.0%	19.8%	1
9/28/2012	39.3%	22.1%	1
10/26/2012	48.3%	28.9%	1
11/23/2012	45.7%	32.1%	1
12/31/2012	52.3%	33.0%	1
1/25/2013	39.5%	22.0%	1
2/22/2013	46.5%	26.4%	1
3/28/2013	40.1%	21.2%	1
4/26/2013	35.0%	20.5%	1
5/24/2013	20.4%	19.2%	1
6/28/2013	26.9%	24.1%	1
7/29/2013	17.8%	19.0%	0
8/30/2013	17.5%	24.6%	0
9/27/2013	12.9%	17.7%	0
10/25/2013	11.8%	15.4%	0
11/29/2013	12.3%	15.6%	0
12/31/2013	12.7%	11.9%	1
1/31/2014	14.2%	13.0%	1
2/28/2014	15.4%	13.9%	1
3/28/2014	6.1%	12.3%	0
4/25/2014	8.6%	15.8%	0
5/30/2014	5.9%	11.7%	0
6/27/2014	2.5%	9.2%	0
7/25/2014	3.3%	8.7%	0
8/29/2014	-2.2%	1.0%	0
9/26/2014	-0.6%	-0.9%	1
10/31/2014	4.3%	4.4%	0
11/28/2014	-2.9%	2.9%	0
12/31/2014	-9.3%	0.3%	0
1/30/2015	-12.4%	-2.8%	0
2/27/2015	-19.0%	-7.3%	0
3/27/2015	-17.1%	-1.9%	0
4/24/2015	-15.4%	-0.8%	0
5/29/2015	-14.1%	0.1%	0
6/26/2015	-8.7%	0.4%	0
7/30/2015	3.96%	4.02%	0
8/28/2015	5.6%	10.2%	0
9/25/2015	6.5%	13.8%	0
10/30/2015	2.0%	4.0%	0
11/27/2015	8.9%	8.4%	1
12/31/2015	13.7%	12.6%	1
1/29/2016	22.6%	22.4%	1
2/26/2016	27.8%	25.4%	1
3/24/2016	26.5%	19.6%	1
4/22/2016	13.7%	14.8%	0
5/27/2016	14.3%	15.6%	0
6/30/2016	23.2%	16.1%	1
7/29/2016	17.1%	16.0%	1
8/26/2016	10.6%	14.6%	0
9/30/2016	18.6%	18.5%	1
10/28/2016	18.3%	24.1%	0
11/25/2016	7.4%	19.2%	0
12/30/2016	4.7%	20.5%	0
1/27/2017	10.5%	21.4%	0
2/24/2017	7.6%	17.4%	0
3/31/2017	6.4%	13.6%	0
4/28/2017	5.8%	13.8%	0
5/26/2017	11.1%	15.1%	0
6/29/2017	7.4%	14.5%	0
7/28/2017	9.6%	12.1%	0
8/25/2017	20.3%	13.5%	1
9/29/2017	9.8%	9.4%	1
10/27/2017	11.9%	6.8%	1
11/24/2017	8.9%	5.6%	1
12/29/2017	11.5%	2.8%	1
1/26/2018	-0.5%	-3.9%	1
2/23/2018	1.5%	0.1%	1
3/29/2018	2.7%	3.6%	0
4/27/2018	1.4%	2.4%	0

Dividend Subset

My backtracking has shown that MFI stocks that pay a dividend seem to do better. I believe this is because a dividends infers that income flows are more likely to be sustainable.  This tends to extract stocks with large one time payments.  That was true again this month-year. My dividend MFI portfolio (which are stocks I track with a yield of 2.6% or greater) were up 21.8%.  MUCH better than the 11.1% for all fifty MFI stocks I tracked.

Finally, I like to track cash as it is more "honest" than percentages as if you go up by 25% and then down by 25%, that is a different result than up by 5% then down by 5%.  So I track what you would have today if you had spread $100,000 over the first twelve portfolios evenly. I think it is obvious why my formula approach is a function of dividend subset.

Category	Value
Total	225,264
Total Russell 3K	267,707
Dividend	516,297